Owners Corp (Formerly the Proprietors) Strata Plan 3438 v Hudson, Geoffrey Stephen
[1998] FCA 762
•3 JULY 1998
FEDERAL COURT OF AUSTRALIA
BANKRUPTCY – Creditor’s petition – act of bankruptcy, alleged non-compliance with bankruptcy notice – whether debtor tendered payment within time fixed in bankruptcy notice – whether tender not accepted by creditor is to be treated as payment – two alternative addresses stated in bankruptcy notice where payment “can be made” – whether both must be addresses where reasonably practicable for debtor to pay creditor throughout period of bankruptcy notice – at one of the addresses, a residential address, secretary of creditor not available during working hours or on two evenings of the week – also secretary not prepared to accept payment without checking with creditor’s solicitor – bankruptcy notice invalid for stating an address where not reasonably practicable to pay at reasonable times throughout period fixed in bankruptcy notice – creditor not entitled to rely on act of bankruptcy in which creditor participates or which creditor forces debtor to commit.
Bankruptcy Act 1966 ss 41 (2)
Bankruptcy Regulations r 4.02 (1)
Bankruptcy Forms Form 1
Alcatel Australia Ltd v PRB Holdings Pty Ltd (1998) 27 ACSR 708 applied
Australian Mid-Eastern Club Ltd v Yassim (1989) 1 ACSR 399 referred to
Marshall v Barkworth (1833) 4 B & Ad 508 (110 ER 546) applied
Ex parte Brown (1838) Mont & C 177 applied
Ex parte Gratton (1841) 2 MD & D 401 applied
Ex parte Musgrove (1843) 3 MD & D 386 applied
Ex parte Danks; re Farley (1852) 2 De GM & G 936 (42 ER 1138) applied
Ex parte Astrup; re le Fevre (1879) 11 Ch D 303 applied
Ex parte Greener; re Greener (1880) 15 Ch D 457 applied
Re Sedgwick; ex parte McMurdo (1888) 60 LTR Rep (NS) 9 applied
Re Dennis; ex parte Dennis (1888) 60 LT 348 applied
In re a Debtor; ex parte Lawrence [1928] 1 Ch D 665 applied
Re Solomon; ex parte Reid (1986) 10 FCR 423 applied
Re Stogdon; ex parte Leigh [1895] 2 QB 534 applied
Re Lynch; ex parte Depela Pty Ltd (1998) 153 ALR 271 applied
In re Beauchamp; ex parte Beauchamp [1904] 1 KB 572 applied
Re Nugent; ex parte Nugent (1985) 5 FCR 161 applied
THE OWNERS CORPORATION (FORMERLY THE PROPRIETORS) STRATA PLAN 3438 v GEOFFREY STEPHEN HUDSON
NG 8081 OF 1997
LINDGREN J
SYDNEY
3 JULY 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 8081 of 1997
BETWEEN:
THE OWNERS CORPORATION (FORMERLY THE PROPRIETORS) STRATA PLAN 3438
APPLICANTAND:
GEOFFREY STEPHEN HUDSON
RESPONDENTJUDGE:
LINDGREN J
DATE OF ORDER:
3 JULY 1998
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
The petition be dismissed.
THE COURT NOTES THAT:
There is no order as to costs.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 8081 of 1997
In the matter of GEOFFREY STEPHEN HUDSON
THE OWNERS CORPORATION (FORMERLY THE PROPRIETORS) STRATA PLAN 3438
APPLICANTGEOFFREY STEPHEN HUDSON
RESPONDENT
JUDGE:
LINDGREN J
DATE:
3 JULY 1998
PLACE:
SYDNEY
REASONS FOR JUDGMENT
INTRODUCTION
The applicant (“the Creditor”) petitions for a sequestration order under s 43 of the Bankruptcy Act 1996 (“the Act”) against the estate of the respondent debtor (“Mr Hudson”). The proceeding is part of a long running course of disputation between the parties. Mr Hudson, who lives at 13 Wylmar Avenue, Cronulla, is the registered proprietor of Lot 18 in Strata Plan 3438 in respect of a building at 21 Coast Avenue, Cronulla. Apparently the disputation commenced when Mr Hudson purchased the unit in 1970 and the Creditor recovered outstanding unpaid charges from him rather than from the previous owner. Apparently that event has left Mr Hudson with a sense of grievance against the Creditor and over the years he has not paid levies as and when they have fallen due, obliging the Creditor to resort to litigation.
IMMEDIATE BACKGROUND
On 12 December 1995 in proceeding NP 931 of 1995, an earlier creditor’s petition brought by the Creditor against Mr Hudson was dismissed and he was ordered to pay the Creditor’s costs as agreed or taxed. On 9 September 1996, those costs were taxed and allowed at $5,475.65.
On 13 February 1997, the Creditor procured the issue of bankruptcy notice NN238 of 1997 in respect of the debt of $5,475.65. On 2 July 1997, Registrar Hedge ordered that service of the bankruptcy notice might be effected on or before 11 July 1997 by pre-paid ordinary post addressed to Mr Hudson at 13 Wylmar Avenue, Cronulla and that upon service in accordance with the order, the notice should be deemed to have been served on 23 July 1997. Registrar Hedge also ordered that the copies of the bankruptcy notice be amended, in effect, to stipulate a time of twenty one days after 23 July 1997 for compliance. The bankruptcy notice was so amended. Paragraphs 3 and 4 of the bankruptcy notice as amended were as follows:
“3. You are required, within 21 days after 23 July, 1997
(a) to pay to the creditor the amount of the debt; or
(b) to make an arrangement to the creditor’s satisfaction for settlement of the debt.
4. Payment of the debt can be made to the creditor at the above address [the address referred to was 403/21 Coast Avenue, Cronulla NSW 2230] or to the creditor’s solicitors, Messrs David G Francis and Co of 28 Urunga Parade, Miranda (PO Box 370 Miranda NSW 2228).”
The bankruptcy notice was posted to Mr Hudson on 9 July 1997 and the period of twenty one days from 23 July 1997 expired on 13 August 1997.
Much of the evidence turned on events just before and just after 13 August 1997. This evidence was directed to the question of whether Mr Hudson did, in fact, make a valid tender of $5,475.65 before expiry of the period fixed in the bankruptcy notice (it is common ground that payment was not accepted within that period). I turn to that question immediately.
DID MR HUDSON TENDER PAYMENT OF THE AMOUNT OF $5,475.65 TO THE CREDITOR BEFORE EXPIRY OF THE PERIOD FIXED IN THE BANKRUPTCY NOTICE?
The evidence
Mr Hudson’s account of events appears in pars 2 and 3 of his affidavit sworn 21 October 1997. Those two paragraphs are as follows:
“2.On the 11th and 12th August, 1997, I attended premises 21 Coast Avenue, Cronulla, in an attempt to see the Secretary of the Owners Corporation Strata Plan 3438. The Secretary was not available.
3.On the 13th August, 1997, I attended at the premises 21 Coast Avenue, Cronulla, and met a person whom I knew to be Dorothy Singleton, whom I also knew to be the Secretary of the Owners Corporation.
I then said:-
‘I have to give you some money.’
Dorothy Singleton replied:-
‘I can’t accept any money from you. I’ll have to speak to David Francis first. I’ll call David Francis on Monday.’
I then said ‘I came by here on the 11th and 12th but you weren’t here.’
She said:-
‘No I was out square dancing. You’ve offered me $2,500.00 to David Francis and the rest a month later.’I said:-
‘Yes that was going to be my next question. I was going to ask if you would take half now but if not I am prepared to pay you the full amount of $5,475.65 now. I can either write you a cheque or give you cash.’She just repeated ‘I can’t accept anything from you.’”
Accordingly, Mr Hudson’s case is one of tender of the amount of the judgment debt, being also the amount stipulated in the bankruptcy notice, on Wednesday 13 August 1997, the last day for compliance with the notice.
There is not much dispute as to later events. I will note them now and return later to consider the events of, and surrounding, 13 August. On 11 September 1997, Mr Hudson deposited $5,475.65 into the trust account of the Creditor’s solicitors, Watkins Tapsell, at the St George Bank. He forwarded a facsimile transmission to Watkins Tapsell on the same day reading as follows:
“A total amount of $5,475.65 has been deposited in your Trust Account at the St. George Bank in complete compliance with the Bankruptcy Notice no. 238-97 re: The Corporate Body of 21 Coast Av, Cronulla, Strata Plan 3438.
I note that you advised on 9-9-97 [see below] that my offer of arrangement made in August 1997 was rejected. This payment is therefore made in full compliance with the Bankruptcy Notice .
Geoff Hudson
[signature]”
It is not suggested that the Creditor or its solicitors consented to the making of the payment into the trust account of Watkins Tapsell. In fact, on 12 September 1997, that firm wrote to Colin Daley Quinn, the solicitors for Mr Hudson, enclosing a copy of Mr Hudson’s facsimile transmission and deposit slip for $5,475.65, and asserting that the bankruptcy notice had not been complied with by 13 August and that an act of bankruptcy had been committed. The letter said that the Creditor was not bound to accept the tender and that there was by then an additional payable sum of $3,452.20 for levies and interest incurred by Mr Hudson to 3 September, as set out in a statement which was enclosed, together with reserved costs of the Creditor’s application for substituted service. The letter also asserted that a further sum of $431.47 was to become due on 1 October. The letter concluded:
“For those reasons the tender is rejected and the cheque will be returned to you as soon as it has been cleared by our bank. The application for a sequestration order against your client has been executed and will be filed on Monday, 15 September, 1997.”
On the same date, 12 September, Hugh Charles Thomas signed a consent to act as trustee in bankruptcy of Mr Hudson’s estate.
True to their word, on Monday 15 September, Watkins Tapsell filed the present creditor’s petition. In addition to the amount of the judgment ($5,475.65), the petition alleged that Mr Hudson owed the Creditor $3,452.20 “for unpaid strata levies and interest under Section 79 of the Strata Titles Act 1973 from 1 January 1996 to 30 June 1997 and under the Strata Schemes Management Act from 1 July 1997 until 3 September 1997”. There was filed with the Creditor’s petition an affidavit of Ian Raymond Holland sworn 11 September 1997, verifying all the matters alleged in the petition other than the commission of the act of bankruptcy, as to which other affidavits were relied upon.
On 17 September, two days after the filing of the creditor’s petition, Colin Daley Quinn wrote to Watkins Tapsell advising that they were instructed that Mr Hudson had attended upon the Creditor on 13 August and tendered payment in satisfaction of the amount claimed in the bankruptcy notice, but that the Creditor had refused to accept the payment. They also referred to the subsequent deposit of the amount in Watkins Tapsell’s trust account at the St George Bank. They advised that any application for a sequestration order would be opposed.
On 9 October, Watkins Tapsell wrote to Colin Daley Quinn. Although there was a typographical error in the letter, it cannot be disputed that the letter conveyed the assertion that no tender of $5,475.65 had been made prior to the expiry of the bankruptcy notice, and that even if such a tender had been made, it did not constitute a compliance with the notice. Watkins Tapsell enclosed their cheque in favour of Mr Hudson for $5,475.65 by way of refund.
On 13 October, the bankruptcy petition was served. On 21 October Mr Hudson filed a notice of appearance, together with a notice of intention to oppose the petition which stated the following grounds of opposition:
“1. The Respondent Debtor within the time set forth in the Bankruptcy Notice tendered payment to the Applicant Creditor of the amount set forth in the Bankruptcy Notice.
2. The Respondent Debtor has not committed an act of bankruptcy.”
Filed with the notice of opposition was Mr Hudson’s affidavit sworn 21 October 1997 containing the paragraphs numbered 3 and 4 which were set out earlier.
The evidence against Mr Hudson’s version of events of a tender on 13 August is found in the affidavits of three persons: David Graeme Francis, the solicitor at Watkins Tapsell for the Creditor; Jodie Witt, a clerk in his employ; and Dorothy Singleton of 302/21 Coast Avenue, Cronulla, who was the secretary of the Creditor at the relevant time. I will give an account of the evidence in chronological sequence, including, again, that of Mr Hudson.
Monday 11 August 1997
Mr Hudson says that on this date he “attended premises 21 Coast Avenue, Cronulla in an attempt to see the Secretary of the Owners Corporation Strata Plan 3438” but that the Secretary was not “available”. He does not identify the time of the day when he attended.
Tuesday 12 August 1997
Mr Tim Daley of Colin Daley Quinn, solicitors for Mr Hudson, telephoned Mr Francis. According to Mr Francis, the conversation was as follows:
DALEY:“Hudson has received the bankruptcy notice. He will pay $2,500.00 now and the balance in a month.”
FRANCIS: “We were about to issue a bankruptcy petition.”
DALEY: “He had 21 days from 23 July.”
FRANCIS:“The amount in the bankruptcy notice probably isn’t all there is, as there are other amounts and they may not agree to instalments in those circumstances. I’ll get instructions.”
According to Mr Francis, he attempted to telephone Ms Singleton, the secretary of the Creditor, but was unable to get a response.
According to Mr Hudson, he (Mr Hudson) again “attended premises 21 Coast Avenue, Cronulla in an attempt to see the Secretary of the Owners Corporation Strata Plan 3438” but again the Secretary was not “available”. Again, Mr Hudson does not identify the time of his attendance.
Wednesday 13 August 1997
On the morning of Wednesday 13 August, Mr Francis gave to his clerk, Ms Jodie Witt, a letter addressed to the secretary of the Creditor for the attention of Ms Singleton. Omitting formal parts, the letter was as follows:
“On 12 August I received a telephone call from Mr Hudson’s solicitor offering to pay the amount claimed in the bankruptcy notice by instalments of $2,500.00 now and the balance in a month. I said that you may not be willing to accept those instalments as I was aware that other amounts had become due but that I would seek instructions.
I am aware from your note to Pauline of 29 May 1997 that at that date Hudson owed $2,926.50 in unpaid levies and interest apart from the costs claimed in the bankruptcy notice, and doubtless based on past form has incurred further debts for unpaid levies and interest.
If you were to accept that offer that would discharge the bankruptcy notice and you would have to commence legal action for recovery of the unpaid levies etc.. On the other hand, if Hudson pays the full amount claimed in the bankruptcy notice, that has a similar effect, i.e. the bankruptcy notice is discharged.
Accordingly, I recommend that you instruct us to reject the offer and immediately file a creditor’s petition in bankruptcy claiming not only the unpaid costs of the previous bankruptcy proceedings claimed in the bankruptcy notice, but also all levies, interest etc. now due. That document is being prepared now. Please telephone and advise us of the current balance outstanding together with interest to date. Then, if you wish to proceed immediately, you could telephone and arrange to call in and swear the affidavit verifying the petition.
Please let us have your instructions as soon as convenient.”
Ms Witt states that it appears from the computer listing for the relevant file that she completed the typing of the letter at 11.48 am. She states that she made no special arrangements for the posting of the letter and that from her knowledge, in the ordinary course of business of the office of Watkins Tapsell, the letter would have been posted at 5.30 pm the same afternoon at the post box outside the Post Office at Oak Road, Kirrawee. She states that she has subsequently telephoned the Turrella Mail Centre where mail delivered to that post box is sorted, and was informed and believes that the earliest a delivery can be made to Cronulla of a letter posted at Kirrawee at 5.30 pm in the afternoon is by noon on the following day. It was not in contest that I should conclude from this evidence that the earliest at which Mr Francis’s letter of 13 August would have been delivered to Ms Singleton’s home unit was 12 noon on Thursday 14 August.
Also on Wednesday 13 August, according to Mr Francis, he received a telephone call from Mr Daley and they conversed as follows:
DALEY: “Have you received instructions yet?”
FRANCIS:“The person I normally dealt with isn’t doing that job any more and her replacement isn’t answering the telephone so I sent a letter. I haven’t received a reply yet.”
Ms Singleton swore an affidavit in which she said that she had read the account in Mr Hudson’s affidavit of the conversation which he claims to have had with her on 13 August. She states that she has “no clear recollection of that conversation”. According to Ms Singleton, who could not recall the day of the week or the date of Mr Hudson’s conversation with her, in August 1997 she attended square dancing every Tuesday and Wednesday night after work between approximately 7 pm and 11 pm. She was not cross-examined. The parties have proceeded on the basis that Ms Singleton was at work from Mondays to Fridays. Mr Hudson did not identify the time of the day when he had his conversation with Ms Singleton. He worked as a self-employed lorry driver at the time.
The effect of the evidence of Ms Singleton and Mr Hudson is that the conversation could have taken place after Ms Singleton arrived home from work on any evening except Tuesdays and Wednesdays, and on those days it could have occurred between the time when she arrived home from work and the time when she departed for square dancing.
Thursday 14 August 1997
As noted above, 12 noon on this day was the earliest time by which Mr Francis’s letter dated 13 August could have been delivered to Ms Singleton’s home unit.
Monday 18 August 1997
According to Mr Francis, at 8.28 am on this day, he received a telephone call from Ms Singleton in which she told him of Mr Hudson’s visit to her. Ms Singleton remembers that she telephoned Mr Francis subsequently to Mr Hudson’s call upon her, but cannot recall how many days elapsed between their conversation and her telephone call to Mr Francis. I accept that Ms Singleton made the telephone call to him at 8.28 am on Monday 18 August.
Thursday 28 August 1997
A person named “Yvonne” from Colin Daley Quinn telephoned Mr Francis and asked whether he had yet received instructions on Mr Hudson’s offer. Mr Francis replied that he had not, but that he would chase up the instructions.
Tuesday 9 September 1997
Yvonne again telephoned Mr Francis and they spoke to the following effect:
YVONNE:“Have you received instructions yet on our client’s offer of $2,500 down and the balance in a month?”
FRANCIS: “I thought I’d passed them on already.”
YVONNE: “No.”
FRANCIS: “I’ve just received instructions and the answer is no.”
Later on the same day, Yvonne telephoned Mr Francis and they spoke as follows:
YVONNE: “What are the extra amounts for?”
FRANCIS:“They are for the strata levies as well as the full amount on the bankruptcy notice.”
Findings
Mr Hudson was cross examined on his evidence that he had the conversation with Ms Singleton on 13 August. He did not keep a diary and there was no documentary or testimonial evidence other than his own testimony suggesting Wednesday 13 August as the correct date. He was challenged in cross-examination in this respect but adhered to that evidence. Ms Nash, the solicitor who appeared for the Creditor, submitted that independent evidence pointed to a different date.
I think that Mr Hudson is mistaken as to the date and that his call upon Ms Singleton probably took place after she arrived home from work on the evening of Friday 15 August. This conclusion is supported by several considerations. First, according to Mr Hudson, Ms Singleton said “I’ll call David Francis on Monday”. This suggests, albeit not conclusively, that Monday was the first opportunity for her to telephone Mr Francis. It would have been the first opportunity if Mr Hudson called upon Ms Singleton on Friday at a time when it was too late for her to telephone Mr Francis that day.
Second, according to Mr Hudson, he said to Ms Singleton “I came by here on the 11th and 12th but you weren’t here”. It is more likely that in conversation he would have referred to days of the week rather than dates. According to Mr Hudson’s own evidence, Ms Singleton replied “No, I was out square dancing”. The first thing to be noted about this is that it suggests that both parties to the conversation understood that the two previous calls were in the evening. What would have given rise to that common understanding? Probably the fact that the conversation they were having was itself taking place in the evening, after they had both finished their day’s work. The second matter to be noted is that Ms Singleton was in fact out square dancing on the evenings of Tuesday 12 and Wednesday 13 August. I think that probably Mr Hudson did not say “11th and 12th”, an unnatural form of conversation, but said “Tuesday and Wednesday”, and has later given the wrong dates, 11th and 12th August, rather than 12th and 13th August.
Third, according to Mr Hudson’s evidence, Ms Singleton referred to the fact that he (Mr Hudson) had offered $2,500 down and the remainder a month later. Accordingly, at the time of the conversation, she already knew of the offer. We know that she received Mr Francis’s letter communicating this offer at some time after 12 noon on Thursday 14 August. That was the first she knew of the offer. This suggests that Mr Hudson called on Ms Singleton on Thursday evening 14 August or Friday evening 15 August. If he called on her on the evening of Thursday 14 August, she probably would not have said that she would telephone Mr Francis “on Monday” but would have said that she would telephone him “tomorrow”, that is, on Friday. In fact she telephoned Mr Francis first thing on Monday morning 18 August.
In the result, I find that Mr Hudson called on Ms Singleton on the evening of Friday 15 August 1997, and had a conversation with her generally to the effect of that deposed to in his affidavit , but substituting “Tuesday and Wednesday” for “the 11th and 12th”.
It follows that Mr Hudson did not tender the amount specified in the bankruptcy notice before expiry of the period fixed in that notice.
IF MR HUDSON’S EVIDENCE BE ACCEPTED, IS HE TO BE TREATED AS HAVING “PAID” THE DEBT?
In this section of these Reasons, I assume, contrary to my finding above, that the version of events deposed to in Mr Hudson’s affidavit sworn 21 October 1997 is to be accepted at face value.
Mr Hudson does not actually say that he had cash on his person to hand over to Ms Singleton. Perhaps he intended to write a cheque or to deliver cash on some future occasion, once he knew if his offer of $2,500.00 down and the balance of $2,975.65 a month later was accepted. The word “now” in his statement “I was going to ask if you would take half now but if not I am prepared to pay you the full amount of $5,475.65 now”, does not necessarily mean “instantly”. Perhaps he intended to go away and come back the same day or the next day with cash. Perhaps he had the full amount of $5,475.65 in notes and coins on his person. He does not say. He does not put into evidence any bank records showing that he had withdrawn such an amount in readiness for payment, if payment in full was insisted upon. If Mr Hudson had gone to the trouble of having $5,475.65 in notes and coin on his person, one would have expected him to produce and tender it, rather than to offer the alternative of a cheque and have to re-deposit the sum of $5,475.65 at the bank. Similarly, if he had $5,475.65 in cash on his person, why did he wish to pay only $2,500 down and the balance in a month’s time? Such questions are left unresolved by Mr Hudson’s evidence.
One thing is clear: the first concern of Mr Hudson and his solicitors was to know if his offer of $2,500.00 down and the balance a month later was accepted. In addition to Mr Hudson’s inquiry of Ms Singleton, it will be recollected that “Yvonne” of Colin Daley Quinn made the same inquiry of Mr Francis on 28 August and 9 September. It was only after Mr Francis told Yvonne on 9 September that the offer was rejected, that Mr Hudson, on 11 September, deposited the full amount into Watkins Tapsell’s bank account.
Mr Hudson bears the onus of proof on the present issue and I am not satisfied on the evidence that he was in a position to tender cash of $5,475.65 to Ms Singleton.
There is a further reason why Mr Hudson’s evidence does not establish a tender of payment. Even if he had the cash on his person, he did not make a present unconditional tender: cf Alcatel Australia Ltd v PRB Holdings Pty Ltd (1998) 27 ACSR 708 (NSW/Santow J) at 713. Rather, payment was conditional upon Ms Singleton’s first rejecting his offer of $2,500 down and the balance a month later. It may be suggested that this was not a true condition, because fulfilment of it was a matter for the untrammelled and unilateral decision of Ms Singleton. I do not think that this view should be accepted. Mr Hudson had never been prepared simply to produce and hand over $5,475.65 in cash. On his own evidence, the most that he had ever been willing to do was to have his offer of instalments considered and rejected and then subsequently to produce and tender the cash. In any event, I find, in view of the long history of disputation between himself and the Creditor (see later), that an offer of payment by instalments was calculated to create difficulty, because Ms Singleton would be likely to wish to take legal advice before accepting it, as was in fact the case.
I turn next to a particular submission made by Ms Nash, solicitor, who appeared for the Creditor. If, contrary to my view, Mr Hudson effectively tendered payment of $5,475.65, it is common ground that Ms Singleton did not accept the tender. In accordance with general principle, an unaccepted tender is not payment and does not discharge the debt: Australian Mid-EasternClub Ltd v Yassim (1989) 1 ACSR 399 (NSW/CA) (“Australian Mid Eastern”) at 403 (Meagher JA, with Samuels and Priestley JJA agreeing).
Paragraphs 3 and 4 of the bankruptcy notice set out earlier suggest Mr Hudson had it within his or her power to avoid committing an act of bankruptcy by paying the amount stipulated in the notice to the Creditor at the address stated in the notice for the Creditor or to its named solicitors at the address stated in the notice for them. Ms Nash submitted that nonetheless a creditor has the power to force a debtor to commit an act of bankruptcy by refusing, “whether for good reason or bad reason, or for no reason at all” (cf Meagher JA in Australian Mid Eastern at 403), to accept a tender of payment by the debtor, and that the circumstances of, and any reasons for, the creditor’s refusal become relevant only if the creditor should present a petition for a sequestration order founded upon the non-compliance with the bankruptcy notice.
Although the availability to the Court of the discretion under s 52 of the Act on the hearing of a creditor’s petition no doubt goes a long way towards overcoming the inflexibility of the position contended for by Ms Nash, it does not do so completely. The act of bankruptcy constituted by non-compliance with a bankruptcy notice has a significance under the Act beyond providing, under ss 43 and 44, the foundation of a petition by the creditor who refused to accept the tender. Not only is the act of bankruptcy available to found a petition by other creditors, it may also mark an earlier commencement of a bankruptcy and of the “relation back” period: cf ss 58, 115 and 116 of the Act.
I do not need to choose between the two competing views, that is, the view that the expression “to pay to the creditor the amount of the debt” in the bankruptcy notice means “to discharge the debt by payment” and the view that it means “to do all that the debtor can be required to do in order to discharge the debt by payment”. The reason is that although cases can be found in which there are statements that an effective tender prevents the commission of an act of bankruptcy, even the authorities which do not go so far are unanimous in their authority for the proposition that, in the absence of special legislative provision, a creditor cannot seek a sequestration order based on an act of bankruptcy where the creditor either participated with the debtor in the commission of that act of bankruptcy or caused the debtor to commit it: cf Marshall v Barkworth (1833) 4 B & Ad 508 (110 ER 546); Ex parte Brown (1838) Mont & C 177; Ex parte Gratton (1841) 2 MD & D 401; Ex parte Musgrove (1843) 3 MD & D 386; Ex parte Danks; re Farley (1852) 2 De GM & G 936 (42 ER 1138); Ex parte Astrup; re le Fevre (1879) 11 Ch D 303; Ex parte Greener; re Greener (1880) 15 Ch D 457; Re Sedgwick; ex parte McMurdo (1888) 60 LTR Rep (NS) 9; Re Dennis; ex parte Dennis (1888) 60 LT 348; In re a Debtor; ex parte Lawrence [1928] 1 Ch D 665; Re Solomon; ex parte Reid (1986) 10 FCR 423 (Beaumont J).
Ms Nash, on the other hand, submits that once it is accepted that an act of bankruptcy is committed even where the commission of it is forced on the debtor by the creditor’s rejection of an effective tender of payment, it becomes a matter of discretion whether a sequestration order should be made, and she further submits that the Creditor was justified in not accepting the hypothesised valid tender of $5,475.65 by Mr Hudson. She relies on two matters in support of this submission. The first is that by 13 August 1997, considerable further indebtedness of Mr Hudson to the Creditor had accrued. The second is the history of the relationship and dealings between the parties.
In relation to the former, an affidavit of Valerie May Peacock, the strata manager of the Creditor, shows that the following amounts have accrued:
(a)Interest under O 35 r 8 of the Federal Court Rules from 10 September 1996 to 27 May 1998 in a sum of $1,023.20;
(b)$2,308.70 for unpaid strata levies and $754.17 interest due under s 79 of the Strata Titles Act 1973 (NSW) from 1 January 1996 to 30 June 1997;
(c) $432.70 for unpaid strata levies and $33.53 interest under the Strata Schemes
Management Act 1996 (NSW) as at 1 July 1997; and
(d) $1,297.95 for unpaid strata levies and $37.74 interest due under the latter Act from 1 October 1997 until 1 April 1998.
In relation to the second matter, the parties agreed upon a history of the dealings between them. A copy of a “history” document signed by the parties’ solicitors is annexed to these Reasons for Judgment. It reveals a truly remarkable tale of “melancholy litigation” of which Knight Bruce LJ’s further words in Ex parte Danks; re Farley (1852) 2 De GM & G 936 (42 ER 1138), describing the dispute between Mr Farley and Mr Danks in that case seem entirely appropriate:
“ …; so, and upon no greater matter – upon a matter that, if they had not good sense enough to settle it for themselves, some respectable neighbour would probably, upon application, have adjusted for them in an hour – began (as I collect), the career of cost and heat and hatred, of reproach, scandal and misery, in which they are now engaged, of which neither this day nor this year, nor perhaps another, will, I fear, see the end, and which seems well to exemplify an old English saying, that the mother of mischief is no bigger than a midge’s wing.” (at 937 (ER 113-9))
No authority was referred to in support of the proposition that a creditor who has procured the issue of a bankruptcy notice is entitled to reject a tender of payment otherwise effective, for the reason that the debtor has become indebted to the creditor for other amounts or on account of the history of the dealings between the parties. The bankruptcy notice which the Creditor procured to be issued on 13 February 1997 required Mr Hudson to pay $5,475.65 to the Creditor within twenty-one days after 23 July 1997 and informed him that payment might be made to the Creditor or to its solicitors at the respective addresses stated for them in the notice. It would make a mockery of such a bankruptcy notice if the Creditor were entitled to reject Mr Hudson’s tender on the grounds suggested.
OTHER MATTERS
The evidence, affidavit and oral, and most of the submissions were directed to the issue whether Mr Hudson tendered payment to Ms Singleton on 13 August, the last day for compliance with the bankruptcy notice. This was consistent with the terms of Mr Hudson’s notice of intention to oppose the petition. These Reasons have, to date, been concerned with that issue.
But Mr Gelbart, counsel for Mr Hudson, also submitted that in stating the address 403 Coast Avenue, Cronulla NSW 2230, the bankruptcy notice did not state an address at which it was reasonably practicable for payment to be made to, and accepted by, the Creditor, during the period allowed in the bankruptcy notice for compliance with it. The submission depends, in the first instance, on the evidence that Ms Singleton worked during the day and was away at square dancing every Tuesday and Wednesday evening. It will be recalled that the Creditor’s solicitor, Mr Francis, deposed that he attempted to telephone Ms Singleton on Tuesday 12 August 1997 for the purpose of taking instructions in relation to the offer made by Mr Daley of Colin Daley Quinn, the solicitors for Mr Hudson, but was unable to get a response.
Ms Nash drew attention to the fact that the bankruptcy notice was posted on 9 July 1997 and that Mr Hudson would have had from the date of receipt to 13 August in which to pay the amount of the debt. She submits that I should infer that the Creditor’s solicitors’ office identified in the bankruptcy notice was open during ordinary office hours during that period. I do so infer.
Subsection 41 (2) of the Act provides that a bankruptcy notice must be in accordance with the form prescribed by the regulations. Bankruptcy Regulation 4.02 (1) provides that for the purposes of subs 41 (2) the Act, the form of bankruptcy notice set out in Form 1 is prescribed. At the time the bankruptcy notice in question was issued, Form 1 contained, relevantly, the following:
“3. You are required, within [insert number in accordance with the note to this paragraph] days after service on you of this Bankruptcy Notice:
(a)to pay to the creditor the amount of the debt; or
(b)to make an arrangement the creditor’s satisfaction for settlement of the debt.
[NOTE: The number of days to be inserted is 21 or, if an order has been made under subparagraph 40 (1) (g) (ii) of the Act, the number of days constituting the time fixed by the order.]
4.Payment of the debt can be made to:
(name) ____________________________________________
of (address*) ____________________________________________
____________________________________________
____________________________________________
* the address must be within Australia”
Although the Act, the Regulations and the Form do not, in terms, qualify the address which may be stated in a bankruptcy notice, it is well established that the address stated must be one at which it is reasonably practicable for the debtor to pay the creditor throughout the period fixed in the notice. The authorities for this proposition include: In re Stogdon; Ex parte Leigh [1895] 2 QB 534 (CA); In re Beauchamp; Ex parte Beauchamp [1904] 1KB 572 (CA); Re Nugent; Ex parte Nugent (1985) 5 FCR 161 (Pincus J); Re Lynch; Ex parte Depela Pty Ltd (1998) 153 ALR 271 (FCA/Davies J). The following passage from Beauchamp has often been cited with approval;
“Suppose a creditor gives as his address his home where he permanently lives. Is he bound to remain at home all day, or never to go out without leaving word where he proposes to go, but, for the matter of that, might not succeed in going? This is impossible. What then are the necessary conditions of the address? We think that the address must be of a place where the creditor is to be found during the seven days, and this is so whether that address is of the residence or of the place of business of the creditor; and we think that, if the address given in the bankruptcy notice is such an address at the date of the service of the notice, occasional absence of the creditor from that address, even for a whole day, will not render the bankruptcy notice inefficient, unless the absence is such as to deprive the debtor of a reasonable opportunity of paying the debt or securing it or compounding for it according to the terms of the notice. And we do not think that it would make any difference that the address was the temporary home of the creditor who happened to have no permanent home, or that the absence relied on as depriving the bankruptcy notice of its efficiency happened to occur on the last day of the seven.
On the other hand, we think that, if the creditor, after the service of the notice, abandoned his place of address, so that it ceased to be a place where at reasonable times the creditor could be found (or some authorized agent on his behalf) to receive payment of the judgment debt, or to deal with the question of security, the bankruptcy notice would cease to be efficient.” (at 583-584)
In the present case, the bankruptcy notice required Mr Hudson to pay the amount of the debt by 13 August and informed him that he might pay it to the Creditor at the address for the Creditor (Ms Singleton’s address) or to the Creditor’s solicitors at the office address stated for them. I think that the effect of giving two addresses was that both had to satisfy the test to which I have referred. If Ms Singleton’s address did not satisfy that test, the position is not saved by the fact that the address of the solicitors’ office did so. This conclusion does not depend at all on the fact that Mr Hudson called at Ms Singleton’s address; it is fatal to the validity of the notice itself: Re Stogdon; ex parte Leigh [1895] 2 QB 534 (CA); Re Lynch; ex parte Depela Pty Ltd (1998) 153 ALR 271 (FCA/Davies J).
Payment could not be made at Ms Singleton’s address during the working day and on virtually the whole of Tuesday and Wednesday evenings. From the date of deemed service (23 July) to the last day for compliance with the bankruptcy notice (13 August) there were twenty-one days, comprising fifteen weekdays and six weekend days (excluding 23 July and including 13 August). Ms Singleton was absent on the fifteen weekdays and on seven of the evenings of those days. In my view, these circumstances show that that address was one at which it was not reasonably practicable for payment to be made throughout the period fixed in the bankruptcy notice. Accordingly, the bankruptcy notice was invalid and non-compliance with it could not give rise to an act of bankruptcy.
That the address stated for the Creditor was not one at which Mr Hudson could pay the debt, and therefore the invalidity of the bankruptcy notice, is also established by a further consideration which was not referred to in submissions. It will be recalled that the opening words of the conversation between Mr Hudson and Ms Singleton were as follows:
Mr Hudson: “I have to give you some money.”
Ms Singleton: “I can’t accept any money from you. I’ll have to speak to David Francis first. I’ll call David Francis on Monday.”
On any reckoning, Mr Francis was not a mere telephone call away: since the conversation was taking place after Ms Singleton arrived home from work, she could not telephone his office until office hours the next working day. It is not possible to be confident what the course of events following her seeking advice from Mr Francis would have been.
Ms Singleton’s unwillingness to accept any payment from Mr Hudson is significant for two reasons. First, it shows that the bankruptcy notice was invalid for failure to comply with the implied requirement than an address which is stated in a bankruptcy notice as one where payment can be made, should in fact satisfy that description. Second, if, contrary to my conclusion expressed earlier, the conversation referred to took place on 13 August, the Creditor was, through Ms Singleton, dispensing with the necessity for Mr Hudson to make an unconditional tender of payment then and there: she was indicating that such a tender would be futile because it would not be accepted before the time fixed in the bankruptcy notice expired. In this way, the evidence shows that the Creditor participated in the commission of any act of bankruptcy which resulted. By reference to the authorities mentioned earlier, the Creditor cannot rely upon such an act of bankruptcy.
CONCLUSION AND COSTS
The petition will be dismissed.
The issue on which Mr Hudson has succeeded is one that was not fairly signalled in his notice of intention to oppose the making of the sequestration order. He did not apply to set aside the bankruptcy notice on the ground of its invalidity. The issue on which he has succeeded was raised late and the submissions made in support of it did not cover the whole of the ground covered by the reasons which I have given above.
There will be no order as to costs, to the intent that the parties will bear their own respective costs.
I certify that this and the preceding eighteen (18) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren
Associate:
Dated: 3 July 1998
Solicitor Advocate for the Applicant: Ms S Nash Solicitors for the Applicant: Watkins Tapsell with David Francis and R J Gilleland Counsel for the Respondent: Mr A Gelbart Solicitors for the Respondent: Colin Daley Quinn Date of Hearing: 27 May and 26 June 1998 Date of Judgment: 3 July 1998
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